Prime SMA Performance Summary – March 2019

Portfolio Objective

To achieve capital growth with moderate tax-effective income via franked dividends through investment in listed Australian securities.

The Model Portfolio is managed by selecting primarily those securities with moderate growth potential but robust cash-generating capacity. These securities are expected to deliver an above-market average income yield, together with a relatively moderate level of capital growth. The portfolio benchmark is the S&P/ASX200 Accumulation Index.

Portfolio Commentary & Positioning

Global equity markets continued to climb higher in March with the MSCI World Index rallying for the third consecutive month adding 1.5% to take the annual year-to-date return to 11.5%

The Federal Reserve’s pivot on monetary policy and a possible resolution to the US/China trade war continues to provide investors with an increased appetite for risk.

US 10 year Treasury yields fell to 15-month lows to yield 2.40%.

China was the notable outperformer in March adding 5% following positive developments on a trade deal. Further policy stimulus in the Chinese economy has also boosted its equity market which has risen 24% this calendar year.

The Australian equity market was slightly ahead in March with the ASX200 Accumulation index adding 0.73% and up close to 11% for 2019.

Large amounts of dividend income hit client portfolios in March due to reporting and dividend season the month prior. PRIME continue to advocate holding a little extra cash in the medium term given our view equity markets are appearing fully valued and due a correction in the near term.

Oil rallied for a third consecutive month with Brent rising 1.8% to $68/barrel and WTI to $60/barrel (+5%.)

Contributors to performance in March were Afterpay (APT) +14%, Pendal Group (PDL) +8% and Regis Healthcare (REG) +7%. Surprisingly there was no fundamental news out on any of these individual stocks during the month so in the case of APT we are attributing its strong performance to its 1H financial results released at the end of February which continues to show strong growth in both users and merchants and continued expansion into the US market. PDLs performance was simply due to the stock having been oversold in the backend of 2018 whilst REG saw a few brokers raise their target prices.

Detractors from performance were Nufarm (NUF) and IOOF (IFL) which fell 10% and 7% respectively. NUFs temporary suspension of its interim dividend along with a minor cut to full year guidance was poorly received by investors who marked the share price down. We support management’s decision to preserve the balance sheet and whilst disappointed with the cut to EBITDA guidance remain upbeat about the company’s future prospects, so much so that we used the share price fall to significantly add to positions. IFL was weak on little news flow so we consider this to be a minor reversion of the previous month’s 30% gains.

We were active in March reducing our position sizes in APT and DOW whilst adding to TLS and NUF in the Growth SMA. The Defensive SMA received capital back for the WBCPDs which were redeemed whilst the Diversified Income and International SMAs were unchanged. On a risk profile performance basis our 5-year numbers continue to perform well against their respective benchmarks.

As at 31 March 2019
Pre-Franking Credits

As at 31 March 2019
Pre-Franking Credits

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Disclaimer: This information has been prepared by Primestock Securities Limited ABN 67 089 676 068, AFSL 239180 (“Prime”). Prime accepts no obligation to correct or update the information or opinions in it. This information does not take into account your objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate to your situation. It is recommended that you obtain financial, legal and taxation advice before making any financial investment decision. Prime is bound by the Australian Privacy Principles for the handling of personal information.


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